SoftBank, Nvidia, and Palantir lead losses as investors brace for a possible AI bubble amid global market volatility.
Global investors are increasingly alarmed by signs of overheating in artificial intelligence (AI)-related stocks, with mounting fears that a valuation bubble could trigger a broader market correction.
This week’s pullback in U.S. equities, led by tech giants tied to the AI boom, has reignited debate over whether the sector’s exponential growth is sustainable — or simply a repeat of the dot-com frenzy.
The sell-off comes amid growing caution from central banks and major financial institutions.
Goldman Sachs CEO David Solomon warned earlier this week that equity markets could face a 10–20% drawdown in the next two years, emphasizing that exuberance surrounding AI and technology valuations may not be fully grounded in earnings potential.
Echoing this concern, the International Monetary Fund (IMF) and the Bank of England (BoE) have both cautioned against speculative excess. Andrew Bailey, Governor of the BoE, told CNBC that while AI represents a “very positive productivity contribution,” uncertainty about future revenue streams in the sector poses significant risk.
“We have to be very alert to these risks,” Bailey said, underscoring the fine line between technological optimism and irrational exuberance.
AI Boom Lifts European and U.S. Companies
Despite the recent volatility, several European companies have benefited tremendously from the AI surge. French electrical equipment manufacturer Legrand, a supplier to Alphabet, Amazon, and other major tech firms, has seen its shares rise nearly 37% this year — matching Nvidia’s performance in percentage terms.
Meanwhile, Anders Danielsson, CEO of Swedish construction group Skanska, which builds data centers and AI infrastructure, dismissed concerns about slowing growth.
“In the U.S., we have a very strong pipeline of data centers — we don’t see any slowdown there,” Danielsson told CNBC. “We’re working with large international customers who are also expanding in central Europe, the Nordics, and the U.K.”
These comments highlight a split between those worried about inflated valuations and those focused on the long-term physical build-out of AI infrastructure — from chips to cloud computing hubs.
Investors Split on AI’s Future
Market analysts at UBS maintain that, despite concerns, the broader investment narrative remains largely positive. Kiran Ganesh, multi-asset strategist at UBS, noted that the rally in AI stocks has been “remarkably smooth” given the magnitude of investment and uncertainty over future profits.
“As we’ve gone through earnings season, results have been reassuring,” Ganesh said. “While some volatility is emerging, that’s to be expected. The bigger picture remains positive.”
Still, some investors are growing wary. Valuations across the AI sector — particularly among semiconductor and data infrastructure companies — have reached levels reminiscent of historical bubbles. This has prompted some market participants to take defensive positions or short highly valued stocks.
SoftBank and U.S. Tech Under Pressure
In Asia, Japan’s SoftBank Group, heavily invested across AI, semiconductor, and application companies, suffered $50 billion in weekly losses. The firm’s stock dropped roughly 10% on Wednesday before resuming its decline on Friday.
Adding to the tension, it was revealed that Scion Asset Management, led by “The Big Short” investor Michael Burry, had built short positions against Palantir Technologies and Nvidia — a move that drew criticism from Palantir CEO Alex Karp.
Meanwhile, Glen Smith, Chief Investment Officer at GDS Wealth Management, took a more optimistic tone, suggesting that the correction could present an opportunity:
“Some big tech stocks are on sale,” Smith said. “This could be a chance for investors who missed the market’s strength over the past two months.”
Calls for Diversification
Other analysts, however, caution that investors may be too concentrated in a handful of AI-linked U.S. companies. Luca Paolini, Chief Strategist at Pictet Asset Management, advised a more balanced approach:
“Stretched valuations mean we’re neutral on U.S. names,” Paolini noted. “Emerging markets are preferred — especially India, Brazil, and other developing economies benefiting from AI-driven investment and monetary easing.”
As global markets digest a mix of optimism and anxiety, the question remains whether the AI revolution will continue to propel stock prices higher — or whether investors are on the brink of another tech bubble.
For now, the message from top financial leaders is clear: the world’s most powerful growth story could also become its greatest risk if exuberance turns into excess.